Duke Energy to Acquire Ibener

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Duke Energy International (“DEI”), a subsidiary of Duke Energy Corporation (DUK), has agreed to acquire Iberoamericana de Energía Ibener S.A. (Ibener), a subsidiary of CGE Generación S.A. in Chile. As a part of the acquisition, the company will also acquire two hydroelectric generating assets with a total generation capacity of 140 megawatts for $415 million.

The two run-of-river hydroelectric power plants, Peuchén and Mampil, will utilize the water from the Duqueco River (VIII region). The electricity generated from these plants will be transferred to the Central SIC grid at the Charrúa 220 Kv transmission system.

The company expects to complete secured financing for approximately 50% of the purchase price from a group of local banks in the first quarter of 2013.

This is not for the first time that DEI has entered into Latin America. With its merger with Progress Energy, the company has already acquired bankrupt Chilean Campanario power plant from private-equity fund Southern Cross Group for $86.2 million in July 2012. The 240 megawatt diesel generating facility is now known as Yungay plant.

Going forward also, the company intends to continue to evaluate additional growth projects in Latin American countries like Chile, based on its strong growth potential and a stable regulatory system.

Duke Energy Corporation’s U.S. electricity and gas operations are spread over the Carolinas, Florida, Indiana, Kentucky and Ohio that generate a relatively stable and growing earnings stream. Duke Energy is moving ahead globally for more renewable sources of energy. Recently, it completed the second wind farm in Kansas – the Ironwood Windpower Project in Ford County in collaboration with Sumitomo Corp. of America, which is a part of Tokyo-based Sumitomo Corp.

Going forward, key growth drivers of the company include its recently concluded merger proceedings with Progress Energy Inc., its strong balance sheet and ongoing capital expansion projects.

However, we remain concerned due to the present unfavorable macro backdrop, predominantly fossil-fuel based generation assets, tepid demand for electricity, and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Like Duke Energy, one of the company’s peers Dominion Resources, Inc. (D), is also moving toward developing its clean energy portfolio.  Recently, Dominion announced that it would develop a fuel cell power generating facility in Bridgeport, Connecticut. It has acquired this facility from FuelCell Energy Inc. of Danbury, Connecticut. The facility will produce 14.9 megawatts of clean energy that is sufficient to power 15,000 homes.

Charlotte, North Carolina-based Duke Energy is a diversified energy company with a portfolio of domestic and international, natural gas and electric, regulated and unregulated businesses, which supply, deliver, and process energy for customers in North America and selected international markets.

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